Page 39 - bne magazine November 2021_20211104 uzbekistan risding

bne November 2021 Special focus I 39
ments in local gas production over the years have left Europe more dependent on imports than ever before. In the EU’s case, 90% of the bloc’s gas now comes from overseas.
Dutch earthquakes
For many decades, the Groningen field off the coast of the Netherlands was Europe’s largest gas producer. Its output hit a peak of 88 bcm in 1976, but produc- tion activities led to earthquakes, caus- ing damage to property in the area.
That was why the Dutch government in 2014 ordered Groningen’s operators, Royal Dutch Shell and ExxonMobil, to
Dutch gas output slumped to an historic low of 20 bcm in 2020, down from over 75 bcm a decade earlier.
Years of UK decline
UK gas output has similarly been on
a downward trajectory since the early 2000s. With an output of only 40 bcm last year, the UK now relies on imports to cover around half of its demand. In 2004, in comparison, the country was self-sufficient in gas.
Arguably, successive governments could have done more to incentivise offshore gas development over the years, but were discouraged from doing so because
logical Survey at nearly 40 trillion cubic metres. But amid strong local opposition to the use of hydraulic fracturing, these unconventional resources remain locked in the ground. The UK’s Conservative government, which has long advocated shale gas extraction, imposed a tempo- rary moratorium on the use of hydraulic fracturing in November 2019, in order to shore up support ahead of general elec- tions that year. This was largely seen as the death knell for the sector.
It is difficult to say exactly how much of an impact large-scale shale gas devel- opment would have had for the UK’s energy mix. But in 2013, then Prime Minister David Cameron estimated that if even 10% of known reserves were extracted, the UK would be able to cover its gas needs for over 50 years.
Moving forward, the UK government looks set to take a more aggressive stance against gas development. Under a revised policy, upstream regulator Oil and Gas Authority (OGA) has said it will scrutinise new projects more over their environmental impact. And earlier this month, the Offshore Petroleum Regula- tor for Environment and Decommission- ing refused to approve Shell’s plan to develop the Jackdaw field, expected to supply a substantial share of UK produc- tion in the late 2020s.
OGUK, a lobby group for the UK gas and gas industry, warned on October 6 that without continued investment in gas
“For many decades, the Groningen field off the coast of the Netherlands was Europe’s largest gas producer, but production activities led to earthquakes and it is being losed”
start reining in supplies. Originally, the field’s full closure was anticipated in 2030, but this was brought forward in 2019 to 2022.
While the Netherlands ordered Gron- ingen’s closure on account of the earthquakes, broader climate concerns influenced the government’s 2019 deci- sion to fast-track the process. What is more, despite the current crisis, the gov- ernment has insisted that Groningen’s closure will go ahead as planned.
The Netherlands has stifled upstream investment in other ways. Notably in 2019, a Dutch court ruled that the Netherlands’ previous standards for issuing construc- tion permits violated EU laws protecting the environment from nitrogen oxides, putting billions of dollars of projects in many industrial sectors, including natural gas, on hold. Several operators have cited the nitrogen ruling as the main reason for cancelling investments, including German-Russian joint venture Wintershall Noordzee, which in November last year axed a plan to develop two oilfields. Mean- while, the government has also delayed introducing new incentives to encourage investment in fields.
of climate concerns and the shift in priorities towards offshore wind power development. But the UK North Sea is also a mature region, and so to an extent the decline has been inevitable. What is more, its production is increasingly high- cost, making it vulnerable to market downturns like those that occurred in 2014 and last year.
The UK has considerable onshore shale gas reserves, estimated by the British Geo-
Gas production in the EU between 1970 and 2019 (millions of cubic metres)
www.bne.eu